The Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law on Friday, March 27, will provide much-needed assistance to a country struggling with the impact of the coronavirus (COVID-19) pandemic. The $2 trillion economic relief plan has numerous provisions aimed at helping U.S. workers, small businesses, and industries. The following information summarizes some key provisions of the bill; employees and employers should contact their attorney or one of our employment attorneys at Minami Tamaki for specific legal advice.
Individuals who earn $75,000 in adjusted gross income or less will receive direct payments of $1,200. Married couples earning up to $150,000 will receive $2,400. For every qualifying child age 16 or younger, the payment will be an additional $500.
Stimulus payments phase out for earners above the income thresholds until stopping altogether for single people earning $99,000 or married people with no children earning $198,000.
Eligibility for stimulus payments is based on 2019 income. For individuals who have not prepared a 2019 tax return yet, their 2018 income amounts will apply.
The stimulus package will increase the amount of unemployment benefits that many individuals can receive, extend the length of time that benefits can be received, and include many workers not previously eligible for unemployment insurance.
The exact amount of unemployment benefits that workers will receive differs by state, but benefits will be expanded in an attempt to replace workers’ paychecks. Individuals will be able to receive an extra $600 per week for up to four months on top of state unemployment benefits.
The stimulus package also provides eligible workers with an additional 13 weeks of unemployment insurance on top of what they would normally be able to receive in their state. The maximum benefit period in California is typically 26 weeks, so Californians will now be able to receive up to 39 weeks of unemployment benefits.
Self-employed workers, independent contractors, freelancers and gig economy workers who have lost work due to the coronavirus pandemic are eligible for unemployment insurance under the CARES Act. These individuals who do not regularly qualify for unemployment insurance will be able to receive 50% of the average unemployment benefit in their state, plus the $600 per week payments.
Small Business Paycheck Protection Program
Businesses with fewer than 500 employees (including non-profit organizations) will have access to loans backed by the Small Business Administration. These loans are eligible for forgiveness if used for covering payroll, rent, utilities, and other qualifying expenses in order to maintain operations during the coronavirus pandemic. Accrued interest is required to be repaid.
Small businesses can receive loans of up to $10 million with interest rates capped at 4%. The bill provides for an expedited origination process with local lenders determining eligibility and credit worthiness.
Small Business Economic Injury Disaster Loans
The CARES Act provides additional funding to expand the Small Business Administration’s Disaster Loan Program. Businesses with fewer than 500 employees may apply for loans of up to $2 million to cover expenditures necessary to alleviate economic injury caused by the coronavirus pandemic.
Disaster Loan Program applicants can also seek an emergency grant of $10,000. Notably, businesses are not required to repay the $10,000 even if their underlying application is later denied.
More information on the Disaster Loan Program is available here.
The CARES Act also includes provisions regarding tax credits to provide relief to employers whose operations have been impacted by the coronavirus pandemic, and to incentivize employers to keep workers on staff. Employers should consult with their tax advisors regarding these provisions of the bill.
For more information on employee benefits and business solutions related to the coronavirus, contact us online or call us at 415-788-9000.
*The contents of this article are for informational purposes only and does not constitute legal advice or tax advice. Readers should contact a licensed California attorney to obtain advice with respect to any particular legal matter. Readers should contact a tax professional for advice on taxation issues. Information on this website may not constitute the most up-to-date legal or other information. Use of this website does not create an attorney-client relationship between the reader and Minami Tamaki LLP.